Happy About the Fiscal Cliff Deal?

Happy about the Fiscal Cliff deal? Did it accomplish anything of significance, as far as dealing with our National Debt and transfer payments? Here is what David Brooks of the New York Times has to say:

Over the course of the 20th century, America built its welfare state. It was, by and large, a great achievement, expanding opportunity and security for millions. Unfortunately, as the population aged and health care costs surged, it became unaffordable. Public debt as a percentage of gross domestic product was around 38 percent in 1965. It is around 74 percent now. Debt could approach a ruinous 90 percent of GDP in a decade and a cataclysmic 247 percent of GDP 30 years from now, according to the Congressional Budget Office and JPMorgan.

By 2025, entitlement spending and debt payments are projected to suck up all federal revenue. Those obligations will lead to gigantic living standard declines for future generations. According to the International Monetary Fund, meeting American’s long-term obligations will require an immediate and permanent 35 percent increase in all taxes and a 35 percent cut in all benefits.

If Congress couldn’t make a single tough decision under these circumstances, why should we think it’ll make any further down the road?

The average Medicare couple pays $109,000 into Medicare and gets $343,000 in benefits out. This is $234,000 in free money. Many voters have decided they like spending a lot on themselves and pushing costs onto their children and grandchildren. They have made it clear that they will destroy any politician who tries to stop them from cost-shifting in this way.

As Ron Paul put it, “We have passed the point of no return.” As Bill Holter put it, “It’s over, it’s a mathematical certainty.”

Our politicians have shown their inability to make the “difficult” choices, so how in the world do you expect them to make the “impossible” choices? Taken as a fact that congress will not curtail spending nor can they raise taxes enough to make a difference, then the result is one of two events: default on our debt (very unlikely, or hyperinflate it away (near certainty).

The number will be fudged but the reality will hit middle-America in the pocket book at the grocery store and at the gas pump (not to mention tuition, medical costs and just about on everything we import). Our government can’t sell bonds to the rest of the world while offering near-zero interest rates. The Fed will (must) continue to purchase the bulk of our trillion plus annual debt. Sooner or later, probably sooner, the value of the dollar will give way to the mountain of new money being created by the Fed to buy the bonds. I mean it does work its way into the economy via government transfer payments. The fat man can only hide his girth by wearing lose-fitting sweaters for a while. Sooner or later, as he continues to add weight, the bulge will show. And so will the inflation.

Once that happens, confidence in the dollar will drop off a cliff and we are on our Merry Old Way toward hyperinflation. You can define “hyperinflation” any way you wish, but let’s start with at least 25% and up, with “up” being any amount you wish to come up with.

Try buying inflation hedges, like the precious metals, when that happens. Remember, Gerald Celente, John Williams and Jim Sinclair all warn that this will happen and within the next 12-36 months. Their combined track record is solid!

As far as I can see, 2013 will be like 2012 – nothing will get done and things will get worse. Let’s see what all our Liberal friends have to say when things go to pot on Obama’s watch. They can’t lay the blame on Bush this time. Yes, Mr. Prez, it’s put up or shut up time now.

Upcoming Events

Meet Miles Franklin investment advisors, attend a Q & A session or join us at an upcoming conference.

Experience Excellence

For 28 years the staff at Miles Franklin has delivered excellence in many ways – knowledge, relationships, product offers and customer service. They understand the macro/micro economics and geo–political advantages to investing in precious metals to protect your wealth. The team at Miles Franklin build life-long relationships because they custom-tailor solutions for investing in precious metals to meet each individual’s needs and circumstances. Our brokers have or can acquire most any type of precious metal from anywhere in the world. Each and every order is managed and monitored from start to finish. We are licensed, bonded, and carry an A+ BBB rating.